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Erdos is an
inner-Mongolia city with rich natural resources. However, it's a ghost town
with many buildings but few people. Home prices just crashed 62% in a few
months.
Let's take this story starting from the beginning.
2011-07-11
China Times reports Housing bubble in Inner
Mongolian city bursts
A property
boom in the Chinese city of Ordos started in 2006, but became stagnant this
year after banks tightened credit and coal enterprises in the region have
consolidated.
Ordos, a city in central-west Inner Mongolia, has deposits of coal and oil. A
recent report by China's Ministry of Housing and Urban-Rural Development
showed that the GDP per capita of Ordos surpassed that of Hong Kong.
The number of the rich people with more than 100 million yuan
(US$15.468 million) is over 7,000. One out of every 15 people in Ordos has
more than 10 million yuan (US$1.546 million). Those
who have only one million yuan (US$154,680) are
considered poor.
With so much wealth floating around, housing prices have skyrocketed.
According to the newspaper Southern Weekend, this third-tier Chinese city
once had real estate prices that averaged 7,000 yuan
(US$1,082) per square meter.
Several buildings sold recently for as high as 13,000 yuan
(US$2,010) per square meter. Home prices in Erdos
have climbed to over half the price in Beijing, one of China's most expensive
property markets with an average of 22,914 yuan
(US$3,544) per square meter.
However since February, home sales have stalled, with only around 10 percent
of properties on the market being sold.
In addition, underground financing is rampant in Ordos. Every housing project
has to seek funds from the private sector, which has taken a 40-50% share of
the lending market.
A developer in Ordos said that some in his industry have invested all their
money into real estate. Now, with new homes still being built, developers must
pay their bills monthly, but since they cannot sell the properties, they are
forced to continue to dump in money. Once banks refuse to offer loans, they
have to borrow from the private sector, forming a vicious cycle of
dependency.
Kang Bashi, the well-known ghost town in Ordos,
represents the epitome of China's housing bubble.
The town, which cost 17 billion yuan (US$2.629
billion) to build, was originally intended to become a city with a population
of around one million, but the number of people actually living there is less
than 20,000.
Chinese media has described the town as "quite barren, with only a few
vehicles passing through the multi-lane highway. Some government offices open
in the daytime. Pedestrians that appear every so often look like illusive
beings, dragging their heavy feet along, like a lone survivor after a
catastrophic event from the movies."
2011-09-29
China Loan Shark Market
Crashes; Scores of Chinese Business Owners Unable to Pay Black Market Loans
Commit Suicide or Disappear
Here is an
interesting email from reader "Kevin" regarding the crashing
loan-shark market in China.
Hello Mish
I am a long time reader and want to bring to your attention on a new
development in China: private business owners are disappearing or jumping off
buildings because they can no longer pay off black market shark loans.
According to national new paper Economics Information (part of state media
Xinhua), on 9/22, Hu Fulin, owner of the biggest
eyeglass manufacture of the city of Wenzhou disappeared, leaving behind 2
billion RMB debt.
On 9/25, 3 more business owners in Wenzhou disappeared (owners of copper,
steel and shoe manufacture).
On 9/27, owner of "Zhengdeli", a shoe
manufacture jumped off of a 22 story building and killed himself.
....
2011-11-24
China
Financial Daily reports Erdos "Ghost Town" property market crash, ten
thousand yuan housing price drop by 70%
Living in
the edge of the Ordos storm , Ordos was beset with a
different version of real estate lending Wenzhou panic . For example, local ” Jinxin Han Lin
Yuan ” project , its second-hand house prices are around 10,000 yuan , while the market price now only is 3750 yuan.
The example given is a 62.5% decline but some
properties may have fallen 70%. Either way, that is one hell of a price
decline since September.
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